NZ dollar soars, approaching 87 US cts, on RBNZ hike track

June 13
(BusinessDesk) - The New Zealand dollar soared to a
five-week high and is edging toward 87 US cents, after the
Reserve Bank yesterday raised the benchmark interest for a
third time this year and signalled plans for further hikes
were intact, increasing the lure of the nation's
currency.

The kiwi touched 86.99 US cents this morning,
and was trading at 86.82 cents at 8am in Wellington, from
86.50 cents at 5pm yesterday and 85.50 cents before the
Reserve Bank announcement at 9am yesterday. The
trade-weighted index gained to 80.83 from 80.70
yesterday.

Investors have pushed up the value of the New
Zealand dollar after gaining comfort from yesterday's
monetary policy statement that interest rate rises would
continue as the Reserve Bank indicated in its previous
statement in March. Some had bet that governor Graeme
Wheeler could soften the pace of his tightening cycle on
concern about the effect of lower milk prices on economic
growth. Higher interest rates in New Zealand are attractive
to investors in an environment where many other major
central banks are on a neutral or easing path.

"The New
Zealand dollar was the outstanding performer," Kymberly
Martin, senior market strategist at Bank of New Zealand,
said in a note. " The market was clearly taken by surprise
that the RBNZ did not soften its previous stance."

New
Zealand's central bank is expected to deliver another two
rate rises this year, according to a Reuters poll of
economists taken after yesterday's decision. Nine of 13
economists expect the next rise to come in July.

The local
currency faces resistance at 87 US cents with support
approaching 86 cents, BNZ's Martin said.

In New Zealand
today, the Real Estate Institute of New Zealand is expected
to release its latest house price data, and the performance
of manufacturing index and the food price index are also
scheduled for publication.

In China, reports will be
released on industrial production, fixed asset investment
and retail sales while the US has the producers price index
and consumer confidence. A report yesterday showed US retail
sales were weaker than expected in May.

The kiwi rose to a
13-month high of 64.23 euro cents overnight, and was trading
at 64.01 cents at 8am from 63.87 cents at 5pm yesterday. The
local currency touched a month high of 51.64 British pence
and was trading at 51.57 pence at 8am from 51.49 pence
yesterday. The British pound was weakened by comments from
UK Chancellor George Osborne that macro prudential policies
may be introduced, implying interest rates at the Bank of
England may be lower for longer.

The New Zealand dollar
weakened to 92.14 Australian cents from 92.22 cents
yesterday. The local currency was little changed at 88.28
yen from 88.29 yen yesterday ahead of the Bank of Japan
meeting today where no change to policy is
expected.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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